Looking for a few good entrepreneurs

Venture capitalists will plow hundreds of millions of dollars into Washington state this year. But that influx of capital doesn’t necessarily translate into more entrepreneurs.

According to a report released today (PDF) by the Ewing Marion Kauffman Foundation, Washington ranks near the bottom of the list when it comes to entrepreneurial activity with only 230 adults per 100,000 starting new businesses each month last year.

Blame it on eastern Washington? Not so fast. Seattle’s entrepreneurial activity also was at the bottom of the major cities studied, tied with Boston with just 190 adults per 100,000 forming new ventures.

That’s well below the national rate of .29 percent of adults striking out on their own.

Only Alabama, Delaware, Kentucky, Missouri, Pennsylvania and West Virginia — states that aren’t really known for entrepreneurial environments — ranked lower than Washington. Interestingly, the state was tied with Massachusetts, Michigan, Nebraska and North Carolina in terms of entrepreneurial activity.

A lot of people like to tout Seattle’s entrepreneurial community, pointing to successful companies such as Amazon.com, Costco, Microsoft and Starbucks that have grown up here in the past three decades or the dozens of technology startups that are just gaining a foothold. Others say there is a history of risk taking in the Pacific Northwest that can be traced back to the Klondike Gold Rush and the pioneers who moved out west.

So I am not sure what to make of the Kauffman results, especially given that the Technology Alliance earlier this month provided some preliminary results from an upcoming study that gave high marks to the state’s entrepreneurial climate. I have a call into the Kauffman Foundation to see if they can provide some additional insights.

A second report (PDF) from the Kansas City foundation indicated that immigrants are more likely to create entrepreneurial ventures than native-born Americans.

The rate of entrepreneurial activity among immigrants was .35 percent last year, which compares to .28 percent for native-born Americans.

The report also found that an average of 464,000 people created new businesses each month in 2005 — down from 470,000 in 2004. Men and Latinos did not start as many businesses last year, while company creation among women held steady at .24 percent. And the report showed that the gray hairs are back, with .34 percent of those between the ages of 55 and 64 engaged in new business startups.

African Americans were the only ethnic or racial group to experience a gain in 2005. African Americans started about 46,700 new businesses per month last year, which compares to about 40,200 per month in 2004.

UPDATE: My story today provides some commentary from author of the study Robert Fairlie, who called the Washington results “oddball” and a “random fluctutation.” He also noted that Washington state had one of the highest rates of entrepreneurial activity in 2004, with 420 adults per 100,000 starting companies each month. Looking at the change between 2004 and 2005, Fairlie said that is “probably the biggest decrease of any state.”

“I just can’t imagine that is real unless the economy in Washington just went into the tank between 2004 and 2005 and we know it didn’t — there were no major changes,” he said.

Looking for a few good entrepreneurs

Venture capitalists will plow hundreds of millions of dollars into Washington state this year. But that influx of capital doesn’t necessarily translate into more entrepreneurs.

According to a report released today (PDF) by the Ewing Marion Kauffman Foundation, Washington ranks near the bottom of the list when it comes to entrepreneurial activity with only 230 adults per 100,000 starting new businesses each month last year.

Blame it on eastern Washington? Not so fast. Seattle’s entrepreneurial activity also was at the bottom of the major cities studied, tied with Boston with just 190 adults per 100,000 forming new ventures.

That’s well below the national rate of .29 percent of adults striking out on their own.

Only Alabama, Delaware, Kentucky, Missouri, Pennsylvania and West Virginia — states that aren’t really known for entrepreneurial environments — ranked lower than Washington. Interestingly, the state was tied with Massachusetts, Michigan, Nebraska and North Carolina in terms of entrepreneurial activity.

A lot of people like to tout Seattle’s entrepreneurial community, pointing to successful companies such as Amazon.com, Costco, Microsoft and Starbucks that have grown up here in the past three decades or the dozens of technology startups that are just gaining a foothold. Others say there is a history of risk taking in the Pacific Northwest that can be traced back to the Klondike Gold Rush and the pioneers who moved out west.

So I am not sure what to make of the Kauffman results, especially given that the Technology Alliance earlier this month provided some preliminary results from an upcoming study that gave high marks to the state’s entrepreneurial climate. I have a call into the Kauffman Foundation to see if they can provide some additional insights.

A second report (PDF) from the Kansas City foundation indicated that immigrants are more likely to create entrepreneurial ventures than native-born Americans.

The rate of entrepreneurial activity among immigrants was .35 percent last year, which compares to .28 percent for native-born Americans.

The report also found that an average of 464,000 people created new businesses each month in 2005 — down from 470,000 in 2004. Men and Latinos did not start as many businesses last year, while company creation among women held steady at .24 percent. And the report showed that the gray hairs are back, with .34 percent of those between the ages of 55 and 64 engaged in new business startups.

African Americans were the only ethnic or racial group to experience a gain in 2005. African Americans started about 46,700 new businesses per month last year, which compares to about 40,200 per month in 2004.

UPDATE: My story today provides some commentary from author of the study Robert Fairlie, who called the Washington results “oddball” and a “random fluctutation.” He also noted that Washington state had one of the highest rates of entrepreneurial activity in 2004, with 420 adults per 100,000 starting companies each month. Looking at the change between 2004 and 2005, Fairlie said that is “probably the biggest decrease of any state.”

“I just can’t imagine that is real unless the economy in Washington just went into the tank between 2004 and 2005 and we know it didn’t — there were no major changes,” he said.